Citizen exclusive: New deal no excuse for a spending spree, Melnyk says

JAMES BAGNALL
OTTAWA CITIZEN

A couple of sweet broadcasting deals — the regional one unveiled Wednesday by Bell Media and its affiliate TSN, and a national contract announced last fall by Rogers Communications — have sharply improved both the financial health of the Ottawa Senators and the mood of its mercurial owner, Eugene Melnyk.

For one thing, the deals are expected to generate an estimated $20 million to $30 million in annual revenue for the Senators over the next 12 years — a factor that has substantially boosted the value of the team and the arena. Melnyk would likely have no trouble selling the properties for more than $400 million U.S., up $100 million U.S. in just the past year.

Equally important, the extra broadcasting sums will almost certainly allow Melnyk to close a long-running gap between the operation’s revenues and costs. Since he acquired the team and arena in 2003, Melnyk has suffered a cumulative cash drain of $110 million U.S.

While the extra broadcasting revenue would appear to give him a very comfortable cushion, it’s not a sure thing. There are expenses he can’t control — such as the value of the Canadian dollar. Melnyk pays his players in U.S. currency, which is now 10 per cent more costly than a few months ago. Other team expenses — from players’ salaries, energy costs and marketing — will also go up.

Even so, it’s clear Melnyk is a happier man these days.

“This puts us on a solid footing,” Melnyk said in reference to the broadcasting deals. “We are going to be competitive in spending on players. If I need to spend an extra $2 million to $3 million (on unrestricted free agents) to make the playoffs, it’s a no-brainer. I’ll do it.”

Yet Melnyk also made it clear that, despite the extra $20 million to $30 million in extra broadcasting revenues, he’s not about to open his vault.

“We’re still going to spend wisely,” he said, suggesting he does not intend to shell out the maximum permitted under salary cap rules.

“Just because you have extra money in your pocket, doesn’t mean you go out and spend it,” he said. His philosophy of patiently — and inexpensively — developing raw talent remains front and centre in the Senators organization.

Melnyk declined to confirm the precise value of the Bell Media arrangement. Some reports have cited potential revenues of up to $400 million U.S. through the 2025-26 season.

However, Melnyk said (without confirming the figure) this includes the value of other local broadcasting deals — ones not involving Bell Media — that have yet to be announced. The value attributed to the contract also includes, among other things, the considerable impact of inflation over more than a decade.